I have an old Fidelity 401k from my old employer which I kept in case I wanted to go back and work for them. I no longer intend to return to Kaiser so I have decided to roll the 401k over into my IRA. The process of a 401k rollover is quite simple.
I recommend contacting your IRA brokerage company first and letting them orchestrate the transfer.
A 401k is an employer sponsored retirement account. In many ways it’s similar to an IRA which is also a retirement account.
By IRS rules you have the option of rolling your employer 401k over into your own private IRA once you separate from service.
You may want to rollover your 401k if you have better investment options in your IRA. Or it might be to simplify your investment portfolio.
I don’t like having multiple investments scattered between different brokerages. In the past I have successfully rolled over my Charles Schwab 401k into my Vanguard IRA.
I tried doing the same with my Charles Schwab Keogh plan but was denied.
Fees are another factor to consider. One of the reasons I dislike companies such as Fidelity and Charles Schwab is because of their lack of transparency.
I spent a long time searching for my 401k fees on the Fidelity website and came up empty. Even after looking through online statements and 401k documents I wasn’t able to find out how much my 401k charges in fees annually.
1. Contact Vanguard
It’s best to start with your IRA brokerage and let them know that you want to initiate a rollover.
Vanguard will give you an account number to roll that money over to after you initiate the process online.
They will also provide you with instructions on how to deal with the 401k company. In my case it’s Fidelity who will need to send my funds over to Vanguard.
2. Contact Fidelity
There is no online form to fill out for Fidelity in order to start the rollover process. It’s 2018 – this is silly. There is no reason for this process to require a phone call.
So my next step is to call the phone number that pops up in order to have them release my funds.
The representative will make out a check to Vanguard on my behalf. This money then gets directly deposited into my IRA account.
3. Fill Out Documents
Fidelity doesn’t need any paperwork filled out and so I can handle it with a phone call alone. Your 401k company may need you to file some paperwork.
Vanguard will generate documents which you can send over to your 401k company with proper instructions for them.
Receiving a Check
Your 401k financial institute may not be savvy enough to handle a rollover properly. Charles Schwab made the check out to me instead of sending it to Vanguard when I requested my rollover.
This created a problem because CS reported this as a taxable event to the IRS for which I got an audit letter.
The best option is for the 401k company to send the money directly to your IRA brokerage house on your behalf.
If you get sent a check then you have 60 days to forward that check over to Vanguard. I would recommend to include a letter of explanation to the IRS that year to avoid the audit hassle.
You can rollover your 401k directly into a particular fund(s) or roll it over into your money market account initially.
After the money is transferred don’t waste any time. Make sure to invest the money right away if that’s part of your investing strategy. This way you ensure the most amount of time in the market.
Your IRA should have a lot more options than your old 401k. Regardless of what you were invested in before, be sure to reconsider your options when making the 401k rollover.